FOOL CONFERENCE CALL SYNOPSIS*
By Debora Tidwell (MF Debit)

Ross Stores Inc. <% if gsSubBrand = "aolsnapshot" then Response.Write("(NASDAQ: ROST)") else Response.Write("(NASDAQ: ROST)") end if %>
8333 Central Avenue
Newark, CA 94560-3433
(510) 505-4400

UNION CITY, Ca., November 24, 1996/FOOLWIRE/ --- Ross Stores released third quarter 1996 results last week. Net earnings for the quarter doubled to a record $16.4 million or $0.64 per share compared to net earnings of $7.9 million or $0.32 per share for the same quarter last year. Total sales for the quarter increased 22% to $403 million and same store sales were up a record 14% from last year.

NINE MONTH RESULTS. For the first nine months of 1996, net earnings increased 121% to a record $48.9 million or $1.89 per share compared to $22.1 million or $0.89 per share earned in the same period last year. Total sales year to date are up 21% to $1.2 billion with same store sales up 12% from last year.

WHAT CONTRIBUTED TO STRONG RESULTS. The strength in their business during the third quarter remained broad based throughout most geographic regions. The strongest markets during the quarter were in Southern California and Texas, particularly the Dallas/Ft. Worth market. Merchandise sales strengths were also broad based throughout the store, with the outstanding performers continuing to be home and bed & bath -- areas they are developing with expanded merchandise categories and assortments. They saw other noteworthy sales increases in men's, children's, outerwear, and their ladies special size departments.

MARGINS. Operating results show that gross margin for the third quarter was up almost 150 basis points over last year. This better than expected increase followed a tough prior year comparison when gross margin increased over 100 basis points in the third quarter last year. Their improved profitability is benefitting from the ongoing development and maturation of their buying organization as well as their continued focus on making more opportunistic purchases which enables them to pass on strong discounts to their customers. In addition, the strong increases in same store sales are providing additional leverage on occupancy costs. On the expense side, they saw SG&A expenses decline about 90 basis points, benefitting from the leverage they realized on the strong comparable store sales increase. The improvements in gross margin and expense drove a 260 basis point expansion in their operating margin to a record 6.7% of sales in the third quarter and 6.9% year to date.

SHARE REPURCHASE AND CASH FLOW. During the quarter they also stayed on track with their repurchase program. Through the end of October they had bought back approximately 1.5 million of the 2 million shares authorized for repurchase earlier this year. They expect to complete this program by the end of 1996. The cash flow uses has in the past been done as share repurchases. They will look at what they want to do going forward once they finish their current program. But the cash flow they have the ability to generate will continue as the business grows, growing somewhere in the range of the sales line growth.

INVENTORIES. The balance sheet at mid year shows total consolidated inventories up 17% from the same period in 1995. In store levels are down slightly from last year on a comparable store basis, while pack-away has increased as planned to support the higher levels of business planned for the Spring of 1997. Pack-away is 34% of inventory this year versus 28% last year.

HAWAIIAN LOCATIONS ACQUIRED FROM TJX. In late July, they entered into an agreement with the TJX companies to acquire the leasehold rights to 5 Marshall's and one TJX store in the Hawaiian islands. They are pleased to report that the 5 former Marshall's locations have been converted to the Ross format and grand opened as scheduled on November 2nd -- 3 stores on Oahu, one on Maui, and one in Kona on the big island. All of these new stores are performing exceptionally well with the two existing Ross stores on Oahu, they now operate 7 locations in the islands. This newly dominant market position solidifies Ross' franchise there by making Ross the only major off-price retailer in Hawaii.

OTHER NEW OPENINGS. During October, they also opened 8 additional stores in existing markets. They plan to close four older locations in January and will end 1996 with 309 stores in 18 states.

RETAIL ENVIRONMENT AND STRATEGY. Obviously they are very pleased with the record results they achieved in the first 9 months of 1996. The environment is more favorable this year. Several external factors are benefitting all their prices including a less promotional department store sector, the slowdown in store growth by off-pricers, the beginning of consolidation in their industry, and a healthier economic environment in California. Internally, they believe their financial performance shows that they are maximizing these benefits by executing their strategies well and their customers are responding to the more compelling values they are offering. They are doing this by staying focused on the strategies that contributed to their success over the past several years, and looking for ways to enhance them and execute them more effectively. As they have stated in previous presentations, over the next year or two they will continue to strengthen their staff and resources throughout the company with a special focus on the merchandise organization, continue to buy more opportunistically and diversify their merchandise mix to stay in tune with what their customers want to buy, further simplify their business processes and realize cost efficiencies throughout the organization, target store growth to strengthen their franchise in existing markets and also look for opportunities that might be a good strategic fit in new markets.

HOLIDAY OUTLOOK. Because their performance year to date continues to exceed their expectations for sales and earnings growth they now feel a little more optimistic about their potential for sales gains as they enter the important holiday season. Based on the strong trend coming out of the third quarter they now are forecasting comparable store increases for the fourth quarter to be up about 6-8%. Although this is still a slowdown from their year to date pace, they believe it is still prudent to maintain a somewhat cautious stance for the following reasons: Even though their recent trend has been very strong, there are still uncertainties specific to this year's fourth quarter. Although healthier than last year, the department store business has not been exceptionally strong. If their business softens in the holiday selling season, it increases the likelihood of a more promotional and competitive climate. With Thanksgiving a week later in November this year, all retailers are facing a more compressed holiday selling season with 5 fewer days between Thanksgiving and Christmas. They are also eliminating an expensive chain-wide print insert that has always run on Thanksgiving weekend but has not been very effective in the past few years. This is the most promotional weekend of the year and it has become increasingly difficult for off-pricers to compete with the malls during this traditional kick-off to the holiday season. Their updated sales assumptions for the fourth quarter combined with a slight increase in gross margins and respectable leverage on expenses, if realized, would contribute to the greatest year in their company's history. Operating margin, which was 4.3% in 1994, grew to 5.2% in 1995 and now is expected to approach 8% in 1996. If achieved, this would create earnings per share growth in 1996 in the 73-78% range on a 52-week basis following a 35% increase in 1995.

EXPANSION AND ENTERING NEW MARKETS. They are in the middle of putting together their strategic growth plan. They think for 1997 they are probably going to open in existing markets between 12 and 15 stores. They think by the end of the first quarter, maybe the beginning of the second quarter they will have a pretty strong idea of what they are going to be in new markets for 1998 and going forward. They are only in 18 states, so obviously they believe there is a big opportunity for them. The reason they have been conservative is that they tend to be cautious when they are moving into new markets because they want to make sure they are profitable and they have had big opportunities over the last 4-5 years to grow in their existing markets without going into new markets and without taking that kind of risk. They know it is time to take that step forward and that is why they are into this strategic mode now. They have to move into new markets. There is lots of opportunity for them and probably in 1998 and going forward they will be doing that. New stores tend to be very profitable for them early on.

DIFFERENTIATORS WITH TJX AND MARSHALLS. They don't think they are all that different from TJ Maxx or Marshalls. They think the biggest difference is execution at any given time. They think, as they move forward they don't anticipate differentiating themselves or their competition moving in a direction that would separate the three companies from where they are today. On the buy side TJ Maxx and Marshalls are formidable competitors but Marshalls doesn't see it as any major strength or weakness for them and doesn't see any major difference in dealing in the market as a result of it.

SUMMARY AND OUTLOOK FOR 1997. They are encouraged by the renewed health of their industry. Many of their off-price peers, especially TJ Maxx and Marshalls, are showing strongly improved performance this year. More importantly, looking back over the last 3 years, their performance showed that focused and effective execution of their strategies has enabled Ross to do well even when the environment for off-price was much more difficult. They believe their results show that their strategies are working, enabling them to deliver solid gains in sales and earnings for three consecutive years. Even though they know that next year's comparisons will become increasingly tough their recent trend makes them optimistic about their ability to continue to show respectable gains in sales and earnings during 1997. Their preliminary forecast for next year calls for 4-5% growth in new stores and same store sales increased in the low-to-mid-single-digit range. Combined with a flattish gross margin and continued leverage on expenses, these drivers should contribute to estimated operating margin expansion in the 30-40 basis point range which they believe will enable them to achieve their earnings per share target of around 15% in 1997. Their performance in 1996 has been a direct result of their ability to offer customers more compelling values. Their performance in 1997 will depend on the same basic tenets of their business achieved by excellent people focusing on executing the customer based strategies they have pursued throughout the 1990s.

* A Fool conference call synopsis represents an effort to highlight the salient points of a conference call and should not be taken as an authoritative accounting or transcription of the entire event. Note: Statements made by a company other than historical information may constitute forward-looking statements for which the company can claim protection under the Safe Harbor Act. Please consult the company's filings with the SEC for information on risk factors which might cause actual results to differ materially from the information contained in these forward-looking statements.